This publication presents Australian industry estimates for 2003-04 from the Economic Activity Survey, together with data on a comparable basis for 2001-02 and 2002-03.

Some of the estimates in this publication are derived by prorating data from taxation sources with data collected by the ABS. Due to the complexity of this estimation process, the ABS's current methods of measuring standard error may understate the variability of the estimates. For details, see Technical Note 2.

CHANGES TO THIS PUBLICATION

Estimates of most assets and liabilities items (and related ratios) are not available for the 2003-04 collection, and hence are not included in this issue.

REVISIONS

Data for 2001-02 and 2002-03 have been revised since the previous issue of this publication. All comparisons with earlier years are based on revised data. Revisions to key data items are presented in tables 1.1, 2.1 and 2.2. Revised data for other items are available on-line in updated versions of the original datasets. Please see below.

INFORMATION AVAILABLE ON-LINE

The text components of this publication are available free on-line. A PDF publication and extended data spreadsheets are also available free on-line. To access this information, go to the ABS website home page <http://abs.gov.au>.

INQUIRIES

For further information about these and related statistics, contact the National Information and Referral Service on 1300 135 070 or John Ridley on Sydney (02) 9268 4541.

CHAPTER 1 OVERVIEW

INTRODUCTION

This publication presents 2003-04 estimates of the economic and financial performance of Australian industry. The estimates are based on data collected in the ABS Economic Activity Survey, and business income tax data reported to the Australian Taxation Office.

KEY DATA

Table 1.1 presents a time series for selected items, from 2001-02 to 2003-04. All value data in this table are shown at current prices.

For more information about survey methodology, see Technical Note 1.

The Glossary provides definitions for terms used.

GROSS VALUE ADDED

Table 1.2, from the Australian National Accounts, illustrates the growth of Australian industries over time using chain volume measures of their gross value added. Chain volume measures provide estimates free of the direct effects of price change.

Of the seventeen industries shown in table 1.2, only Mining recorded negative growth (3.5%). By comparison, Agriculture, forestry and fishing recorded the highest growth rate in 2003-04 (31.3%). The highest growth rates for the last 10 year and 25 year periods were recorded by Communication services, with annualised rates of 6.1% and 6.7% respectively.

TOTAL FACTOR INCOME

Table 1.3 shows the contribution of industries to the production (as measured by total factor income) of each state and territory, as well as Australia, in 2003-04. For the purposes of this table, the activity of general government and the ownership of dwellings are each treated as industries.

Of the nineteen industries in the table, Property and business services ranked first (at 13%) in its contribution to Australian industry. Property and business services was the largest industry in New South Wales, and ranked second in six of the seven remaining states and territories. Manufacturing ranked second in its contribution to Australian production (12.8%) and was the largest industry in Victoria, Queensland, South Australia and Tasmania. Although contributing only 4.6% to total factor income nationally, Mining was the largest industry in Western Australia and the Northern Territory.

FURTHER COMMENTARY

Please see:

Industry performance: Chapter 2, page 8

Experimental estimates, 2003-04: Chapter 3, page 42.

CHAPTER 2 INDUSTRY PERFORMANCE

INTRODUCTION

Statistics in this chapter relate to the performance of Australian industry at the industry division level, as defined by the Australian and New Zealand Standard Industrial Classification (ANZSIC), 1993 edition. ANZSIC Divisions K Finance and insurance and M Government administration and defence are excluded. Aggregates excluding these industries are presented at the Total Selected Industries level. Please note that the Education and Health and community services industries, where shown (or included in totals) in this publication, exclude any public sector components. Data for Agriculture, forestry and fishing are only available from 2002-03, so aggregates excluding this industry (as well as Divisions K and M) are presented at the Selected industries level to facilitate comparison between 2001-02 and later years.

These data are presented at the ABN unit/TAU level (see the Glossary for definitions) and, therefore, can contain data about activities normally associated with industries other than the industry to which they relate. See Explanatory Notes paragraphs 3-15 for further details.

Definitions of terms used are shown in the Glossary.

OPERATING BUSINESSES

The total number of businesses operating in the Total Selected industries of the Australian economy increased by 6% between 2002-03 and 2003-04. In 2003-04 these industries consisted of 2,265,600 operating businesses, 125,800 more than in 2002-03.

Refer to Technical Note 1 paragraphs 3-5 for detailed descriptions of the business units used.

All fifteen industry divisions that comprise the Total Selected industries grew in number of operating businesses.

In 2003-04, the industries with the largest number of operating businesses were Property and business services (with 636,700 businesses, or 28% of the Total selected industries), Construction (16%), and Agriculture, forestry and fishing and Retail trade (each with 10%). These proportions are virtually identical to those of 2002-03.

TOTAL INCOME AND TOTAL EXPENSES

For the Total Selected industries, total income increased in current price terms by $125b (7%) between 2002-03 and 2003-04, to $1,803b. Of this increase, sales of goods accounted for $50b and income from services (excluding rent, leasing and hiring income) $59b. In percentage terms, the largest increase (21%) was in other selected income (from $62b to $75b). Interest income was the only published component of total income to decline, falling by 7% from $16b to $15b. The total income of large (employing) businesses increased by $40b (6%), and for other business types it increased by $85b (8%). Apart from the Mining industry, which registered a marginal decrease, all other industries increased total income in current price terms, the largest percentage increase (16%) having occurred in the Property and business services industry.

Total expenses of the Total Selected industries increased in current price terms by $97b (6%) between 2002-03 and 2003-04, to $1,645b. Of this increase, cost of sales accounted for $73b and selected labour costs $20b. The increase among large (employing) businesses amounted to $26b (4%); for other business types, total expenses increased by $71b (8%). Most industries increased total expenses in current price terms. The exceptions were Electricity, gas and water supply and Education (private) (both declining by 1%). The largest percentage increase, of 12%, occurred in the Construction and Property and business services industries. Property and business services also incurred the largest increase in value of total expenses (up $21b), followed by Retail trade (up $18b, or 7%).

In 2003-04, the industry with the largest share of total income for the Total selected industries was Manufacturing, with 18%, followed by Wholesale trade (17%) and Retail trade (16%). On the expense side, the same industries predominate: Manufacturing and Wholesale trade account for 18% each, and Retail trade 17%, of the total expenses of the Total selected industries.

The contribution of large (employing) businesses to both total income and total expenses of the Total selected industries was 38% in 2003-04. Small (employing) businesses contributed 27% to both variables, medium (employing) businesses 25%, and non-employing businesses 11% to total income and 10% to total expenses.

OPERATING PROFIT BEFORE TAX

Operating profit before tax (OPBT) earned by the Total Selected industries in 2003-04 was $164b, an increase in current price terms of $26b (19%) from 2002-03.

In 2003-04, OPBT of large (employing) businesses in Total Selected industries was $58b, an increase of $15b (33%) from 2002-03. For other business types, OPBT increased by $12b, or 12%, to $106b in 2003-04.

The largest increases between 2002-03 and 2003-04 in OPBT occurred in Property and business services ($13b) and Manufacturing and Construction ($3b each). The three industries in which OPBT declined in 2003-04 were Transport and storage (down 22%, or $1b), Mining (down 5%, or $1b), and Agriculture, forestry and fishing (down 2%, or $0.1b).

In 2003-04, 35% of OPBT of the Total selected industries was earned by large (employing) businesses. Small (employing) businesses generated 25%, medium (employing) businesses 17%, and 23% was attributable to non-employing businesses. Non-employing businesses make a higher contribution to OPBT than to most of the other variables presented. However, it should be noted that much of this profit represents the OPBT of sole proprietors and partnerships, which comprise a high proportion of non-employing businesses. The drawings and/or labour costs of these persons are not reflected in estimates of business expenses but are treated as drawings from profits, and as such are not reflected in the estimates.

The Property and business services industry was the largest contributor to OPBT of the Total selected industries in 2003-04, accounting for 26%. This was followed by Manufacturing (15%), and Mining and Construction (each with 10%).

GROSS FIXED CAPITAL FORMATION AND CAPITAL EXPENDITURE

Gross fixed capital formation (GFCF) by the Total Selected industries increased by 17% between 2002-03 and 2003-04, rising by $10b to $68b in 2003-04. This overall increase is the net effect of a very wide range of movements in individual industries.

Similarly, an increase of $4b (or 4%) in capital expenditure at the Total Selected Industries level combined with a fall of $2b (or 8%) in the value of disposals of assets to produce a $6b increase ($69b to $75b, or 9%) in net capital expenditure for the year.

The main contributors to the increase in net capital expenditure were Property and business services ($5b, or 53%), Construction ($1b, or 72%) and Manufacturing ($1b, or 10%).

INDUSTRY VALUE ADDED

Industry value added (IVA) for the Total Selected industries increased by 9%, or $46b, between 2002-03 and 2003-04. All industries recorded increases in current price terms in IVA, except for Mining (down 8%). As in 2002-03, Construction recorded the largest percentage increase, rising 21% from $38b to $46b. Property and business services recorded the largest increase in dollar terms ($14b), from $92b to $106b.

As measured by IVA, the largest industries in 2003-04 were Property and business services (contributing 19% of the value for Total selected industries), Manufacturing (17%) and Retail trade (9%).

In 2003-04, large (employing) businesses generated 39% of the IVA of the Total selected industries. Small (employing) businesses contributed 27%, medium (employing) businesses 23%, and non-employing businesses 11%.

BUSINESS AVERAGES

Between 2002-03 and 2003-04, all average values presented for the Total Selected industries showed increases. Average OPBT increased by 12%, to $72,000. Averages for total income and sales and service income each increased by 1%, whereas average total expenses was virtually unchanged.

INDUSTRY RATIOS

Increases occurred during 2003-04 in profit margin and interest coverage at the Total Selected industries level. However, the investment rate value added declined from 19.8% to 18.9%.

The industry which recorded the largest profit margin in 2003-04 was Mining (24%), and the smallest profit margin was returned in Retail trade (4%).

Values for interest coverage ranged from 10.9 times in Health and community services (private), to 2.3 times in Transport and storage and Electricity, gas and water supply.

The industry which devoted the highest proportion of IVA to acquiring capital assets in 2003-04 was Electricity, gas and watersupply (with an investment rate value added of 41%), closely followed by Mining (at 39%). Construction recorded the lowest value (9%) for this ratio.

BUSINESS PROFITABILITY

For the Total selected industries, 72% of businesses were profitable in 2003-04. The proportion of businesses making a profit in 2003-04 ranged from 84% in the Construction industry to 56% in Agriculture, forestry and fishing.

INDUSTRY ANALYSIS

An analysis of performance by industry follows.

Agriculture, forestry and fishing

In 2003-04, this industry consisted of 235,400 operating businesses. They contributed 3% of total income, total expenses and industry value added for the Total selected industries. This industry's average values of sales and service income, total income and total expenses are all lower than for all other industries except for Personal and other services. Average OPBT and IVA in Agriculture, forestry and fishing is the lowest of all industries shown.

Although OPBT for this industry declined by $0.1b (2%), IVA, rose by $1.2b (7%). Easing of drought conditions and near-record grain production volumes contributed.

Agriculture, forestry and fishing is the industry least dominated by large (employing) businesses, which accounted for only 7% of wages and salaries, 3% of total income and 3% of IVA in 2003-04. By contrast, the contributions of small (employing) businesses to these aggregates were, respectively, 58%, 53% and 58%, the highest for each variable for any of the Total Selected industries.

Mining

A $3b (6%) decline between 2002-03 and 2003-04 in income from sales of goods in Mining, primarily reflecting currency movements and decreased production volumes, was largely offset by a $2.3b (71%) increase in other selected income to produce a stable level of total income. Total expenses increased by $1b (or 2%), contributing to a decline of the same amount (or 5%) in OPBT.

Depreciation and amortisation is a significant element of the cost structure of Mining, representing 15% of its total expenses in 2003-04, the second highest proportion (after Communication services) of all the Total selected industries.

Manufacturing

Manufacturing OPBT increased by $3b (or 14%), resulting from a $12b (4%) increase in total income, an $8b (3%) increase in total expenses, and a reduction of $1b (67%) in the value of the change in inventories.

GFCF and net capital expenditure in Manufacturing both rose by $1b, or 11% and 10% respectively, in 2003-04.

The Manufacturing industry accounted for 18% of total income and sales and service income of the Total selected industries in 2003-04, and was the largest contributor to these aggregates.

Apart from a 13% increase in average OPBT (to $183,100), business averages for Manufacturing recorded little change in 2003-04 compared to their values in 2002-03.

Electricity, gas and water supply

Despite an increase of 18% ($1b) in 2003-04, OPBT of the Electricity, gas and water supply industry is still 4% below its value in 2001-02.

Selected labour costs represent 9% of total expenses in 2003-04 for the Electricity, gas and water supply industry, the second lowest proportion (after Wholesale trade) of any industry. This industry also has the highest proportion of its total expenses represented by interest expenses: 11% in 2003-04, compared to 2% for the Total selected industries.

Of the Total selected industries, Electricity, gas and water supply is the second most heavily dominated (after Communication services) by large (employing) businesses in 2003-04, as measured by their contribution to IVA (81%), OPBT (75%), and total income (70%). Conversely, it is also the industry to which non-employing businesses contribute least: less than 2% in 2003-04 to all financial variables.

Construction

The number of operating businesses in the Construction industry increased by 8% in 2003-04.

In 2003-04, total income and total expenses in Construction both rose by 12% (or $18b and $16b respectively), OPBT by 20%, and IVA by 21%.

Apart from Agriculture, forestry and fishing, Construction is the industry most heavily dominated by small (employing) businesses in 2003-04. They contributed 32% of the OPBT in this industry, compared to 25% at the Total selected industries level, and between 42% and 47% to all other financial variables shown.

Wholesale trade

In 2003-04, Wholesale trade recorded an increase of 7% in the number of operating businesses.

Total income of the Wholesale trade industry increased by 7%, and total expenses by 5%, in 2003-04. OPBT increased by 21%. Income from services continued to decline.

The major source of growth in Wholesale trade has been the Machinery and motor vehicle wholesaling industry subdivision, where OPBT increased by 39% (or $1.5b).

At 8%, the proportion of selected labour costs to total expenses in Wholesale trade in 2003-04 was the lowest of all industries shown. The proportion for the Total selected industries was 18%.

Retail trade

The number of operating businesses in the Retail trade industry increased by 5% between 2002-03 and 2003-04.

Total income and total expenses in the Retail trade industry both increased by 7% in 2003-04. OPBT rose by 19% and IVA by 9%.

On the other hand, declines were recorded in net capital expenditure (down by 11%) and GFCF (25%).

Accommodation, cafes and restaurants

The number of operating businesses in the Accommodation, cafes and restaurants industry increased in 2003-04 by 9%, to 60,400.

Increases of 9% and 8% respectively were recorded in the total income and total expenses of Accommodation, cafes and restaurants in 2003-04. OPBT increased by 30% in absolute terms and by 19% as an average per business. The profit margin of this industry increased from 4.9% to 5.9%.

The tourism-related components of this industry were positively affected by the Rugby World Cup, held in Australia in November 2003, as well as recovery from the adverse effects of global events in previous years.

As a proportion of the total income of this industry, sales of goods has been declining over the three years presented: from 58% in 2001-02 to 51% in 2003-04. Conversely, 46% of the total income of Accommodation, cafes and restaurants was received as income from services in 2003-04, an increase from 38% in 2001-02 and 45% in 2002-03.

Transport and storage

Between 2002-03 and 2003-04, the number of operating businesses in the Transport and storage industry increased by 6%.

Because this industry's increase in total expenses ($7.5b, or 10%) exceeded its increase in total income ($6.6b, or 8%), OPBT decreased (by $1.0b, or 22%). This followed a decline of 8% in 2002-03.

This industry is the second largest source (after Property and business services) in all three years of rent, leasing and hiring income, contributing 8% of the estimate for the Total selected industries. In 2003-04 it also recorded the lowest interest coverage ratio.

Net capital expenditure fell by 12% and GFCF by 11% in 2003-04.

Funding from government for operational costs represented 4% of total income for Transport and storage, reflecting payments to passenger transport operators.

Communication services

In 2003-04, the Communication services industry experienced a 7% increase in the number of operating businesses.

Total income of the industry in 2003-04 increased by 6% (or $2.2b) and total expenses by 4% ($1.4b) and OPBT increased by 13% ($0.8b).

Communication services is the industry in which large (employing) businesses dominate most heavily, generating 82% of total income, 86% of IVA and 88% of OPBT in 2003-04. Communication services is also the industry for which depreciation and amortisation represents the highest proportion of total expenses, at 16% in 2003-04 (compared to 4% for the Total selected industries).

Property and business services

The Property and business services industry consisted of by far the largest number of operating businesses in 2003-04, at 636,700, a 7% increase on the estimate for 2002-03.

Its OPBT increased by 42% ($13b) and IVA by 15% ($14b).

In 2003-04, the Property and business services industry accounted for 13% of total income, 12% of total expenses, 21% of selected labour costs and 19% of IVA of the Total selected industries.

Of total income for this industry in 2003-04, 13% is represented by rent, leasing and hiring income, the highest proportion of any industry shown. At the Total selected industries level, the corresponding proportion is 2%. The Property and business services industry generated 72% of all rent, leasing and hiring income earned by the Total selected industries.

Non-employing businesses accounted for 25% of the total income of the Property and business services industry, the highest proportion of any industry in 2003-04.

Education (private)

The number of operating businesses in the (private) Education industry increased by 6% between 2002-03 and 2003-04.

Selected labour costs represented 60% of total expenses for the (private) Education industry in 2003-04. As well, the $5.5b received in 2003-04 as funding from government for operational costs amounts to 37% of this industry's total income. Both proportions are the highest of any industry shown.

This industry exhibits the highest value for the ratio of wages and salaries to sales and service income of all industries presented. This is consistent with the labour intensive nature of the industry. At 0.87 in 2003-04, this value is more than 80% greater than that of the next-ranking industry by this measure (Health and community services (private)).

(Private) Education is the industry in which medium (employing) businesses are most dominant in terms of total income and IVA, contributing 52% and 53% respectively of the 2003-04 estimates for this industry.

Health and community services (private)

This industry recorded an increase of 6% in the number of operating businesses during 2003-04. Total income increased by 9%, total expenses by 8%, OPBT by 13%, and IVA by 8%.

The cost structure of the (private) Health and community services industry is distinctive in that selected labour costs and cost of sales are very similar, each constituting about 47% of total expenses for all three years presented.

Of the industries included in these statistics, (private) Health and community services is by far the largest recipient of funding from government for operational costs. In 2003-04 it received $11b, or 40% of all such funding paid to the Total Selected Industries. This represented 20% of the total income of the industry.

Cultural and recreational services

The number of operating businesses in the Cultural and recreational services industry rose by 4% in 2003-04.

In 2003-04, total income and total expenses increased by 6% and 3% respectively. OPBT increased by 43% in aggregate, and by 37% as an average per business. IVA increased by 15%.

Personal and other services

The number of operating businesses in the Personal and other services industry increased by 7% in 2003-04.

Of this industry's OPBT in 2003-04, 45% was generated by non-employing businesses.

Between 2002-03 and 2003-04, this industry recorded increases in total income (6%), total expenses (5%), IVA (15%), and OPBT (22%).

Average OPBT earned by businesses in Personal and other services rose by 15% in 2003-04, and average IVA went up by 8%.

table 3.2, which provides a state and territory dissection of these data items at the industry division level.

The data in this Chapter are designated as experimental estimates, as they are based on a relatively new methodology (see Technical Note 1 paragraphs 21-28 for more details). The experimental status applies to ANZSIC group and class level data, and the state/territory data. Hence caution should be exercised with any analysis of these data. Data in table 3.1 at the industry subdivision level should not be regarded as experimental.

Note that the estimates are also subject to non-sampling error, which is discussed in Technical Note 2. All industry codes shown are from the Australian and New Zealand Standard Industrial Classification (ANZSIC) (cat. no. 1292.0), 1993 edition. Definitions of terms used are shown in the Glossary.

INDUSTRY SUBDIVISIONS

The largest industry subdivision in terms of total income in 2003-04 was Business services (Subdivision 78), which earned $167b, or 9% of total income of the Total selected industries. All of the three next largest are in the Wholesale trade or Retail trade ANZSIC divisions:

Personal and household good retailing (Subdivision 52) ($118b, or 7%)

Personal and household good wholesaling (Subdivision 47) ($114b, or 6%)

The largest industry subdivisions that ranked highest in OPBT in 2003-04 were:

Business services (Subdivision 78), with $28.6b, or 17% of total OPBT for the Total selected industries

Property services (Subdivision 77) ($14.4b, or 9%)

Construction trade services (Subdivision 42) ($10.2b, or 6%)

Oil and gas extraction (Subdivision 12) ($8.8b, or 5%).

Business services (Subdivision 78) was also the industry subdivision which paid the highest amount in wages and salaries in 2003-04 ($45.0b), accounting for 17% of wages and salaries of the Total selected industries. The next three largest in terms of wages and salaries paid were:

Personal and household good retailing (Subdivision 52) ($14.1b, or 5%)

(Private) Health services (Subdivision 86) ($13.7b, or 5%)

Construction trade services (Subdivision 42) ($11.8b, or 5%).

INDUSTRY CLASSES

As measured by total income, the largest industry classes, of those available for publication, in 2003-04 were:

Supermarket and grocery stores (Class 5110) ($53.7b, or 3% of total income for Total selected industries)

In terms of wages and salaries paid, the four largest industry classes available for publication in 2003-04 each contributed 2% of the estimate for the Total selected industries. They were:

Business management services (Class 7855) ($5.3b)

Computer consultancy services (Class 7834) ($5.2b)

Supermarket and grocery stores (Class 5110) ($4.9b)

Road freight transport (Class 6110) ($4.7b).

STATE AND TERRITORY ESTIMATES

The above graphic illustrates each state or territory's share of economic aggregates relating to the Total selected industries in 2003-04. The distribution is similar across all variables presented, apart from OPBT. New South Wales contributes less to OPBT than to the other variables shown, whereas the opposite is the case for Western Australia.

The following summary relates to the states and the Australian Capital Territory. The Northern Territory is excluded, because of the limited availability of its data for publication.

Measured by share of total income, Manufacturing was the largest of the Total selected industries in 2003-04 in four of the states (Victoria, South Australia, Western Australia, and Tasmania). In Victoria, Manufacturing's total income barely exceeded that of Wholesale trade. In New South Wales Wholesale trade was the major source of total income, as was Property and business services in the Australian Capital Territory. Retail trade predominated in Queensland.

The Property and business services industry was the major source of OPBT in four states and territories (New South Wales, Victoria, Queensland and the Australian Capital Territory), and Manufacturing in two (South Australia and Tasmania). Mining was the major source of OPBT in Western Australia.

Each state or territory was dominated by its major industry to a different degree. In terms of total income, the predominance of a particular industry was greatest in the Australian Capital Territory, where Property and business services contributed 24%. In comparison, Queensland's major industry (Retail trade) provided 18% of the state's total income.

In 2003-04 Western Australia was the most industrially concentrated state or territory in terms of industries' shares of OPBT, its major industry (Mining) generating 39% of the state's OPBT. Similarly, Property and business services contributed 35% of OPBT in Victoria. By contrast, the main sources of OPBT in Tasmania and South Australia each contributed 23% and 20% of OPBT for their respective states.

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